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19 April 2012

Norwegian Salmon story or … Russian fish business getting ready for the WTO

Hot topic: Russia's ban of Norwegian Salmon

There is a hot discussion about possible consequences of Russia's WTO participation. Some were discussed at recent meeting of the Russian fish processing enterprises representatives with Maxim Medvedkov, Director of Ministry of Economic Development of the Russian Federation.
During the conference Medvedkov, who is also responsible for negotiations with the World Trade Organization, made a number of important statements. In particular, he said that "Russia's WTO accession does not impose constraints on Russia in the implementation of technical measures to control imported seafood. However, use of these measures should be more careful." (in plain text: technical regulations such as sanitary and veterinary are becoming the main instrument for the Russian seafood market regulation).
According to the insider, during the meeting it was announced the establishment of a committee to study the effects of Russia’s joining the WTO, and adaptation of the domestic fishing industry to the WTO rules. It’s interesting to consider, that the representatives of the fish processing enterprises who participated said they knew nothing about the WTO rules, nor the consequences for their business after the Russia’s accession to WTO.
Besides, two questions about the draft EU-Russia agreement were touched. First of them concerning assistance of export of Alaska Pollock fillets to Europe, and second - elimination of existing barriers for imports of fish meal to China.
But what can you say about the following news about temporary banned import of all Norwegian fresh fish to Russia.
Last week Russian Rosselkhoznanzor (veterinary authority) made a preliminary motion to temporarily terminate all imports of Norwegian fresh fish, but it’s still unknown when it will be put into force. According to the Russian veterinary agency, all imports of Norwegian fresh farmed fish can be stopped next week.
The reason, or maybe a pretext, is that Rosselkhoznanzor has serious concerns about sanitary problems with shipments of fresh fish from Norway. In 2011, when Russia became Norway’s largest salmon market, the bulk of all imported fish (nearly 97%) consisted of fresh fish. However, Russia introduces import restrictions on fresh fish on a regular base, applying them to certain suppliers whose batches were identified as containing unwanted bacteria like salmonella. But this is the first time when a ban is considered on all exporters.
Spokesperson Alexey Alexeyenko said that Norwegian authorities inspect only 1 percent of the fish batches exported to Russia, and that is unacceptably low. He believes 25 percent would be a more acceptable rate.
Ole Fjetland, assisting director at the Norwegian Food Safety Authority (NFSA)'s control department, still has not expressed his opinion for exact reasons of a restriction.
In my opinion, any restriction on import of any goods, especially from neighboring countries should always be considered very carefully. As for consequences that the ban, if imposed, will bring to Russia’s fish market, I would highlight three main things.
First, the import restriction will stimulate growth of salmon price since it will considerably reduce access to the raw material for fish processors.
Second, the ban for Norwegian fish can become a green light for imported frozen salmon from Chile producers actively trying to find their ways to the tight Russian market.
And third, Norwegian salmon restrictions are absolutely favorable to Russian salmon and trout producers. Even though domestic output has been low so far, but it shows a positive trend, and this situation will further boost local producers. So it can be just a short term measure to provide advantage to national fish producers.
There’s also another thing to consider. As I learned, in January Russia’s anti-monopoly agency started an investigation into the veterinary agency, and the cause was in its probable colluding with Russia’s largest importers from Norway. According to accusations, Rosselhoznanzor was using sanitary pretexts for restricting imports from those Norwegian suppliers who did not have contracts with Russia’s main importers. It’s also worth mentioning a recent scandal with cheeses imported to Russia from Ukraine when the pretext was exactly the same, i.e. alleged sanitary issues. However, most analysts agreed that the real reason was connected with politics. So the ban of Norwegian fish may be also a tip of an iceberg public does not see yet.
In my personal opinion taking all above into consideration, I believe that the ban will be (if at all) a short term measure. Restrictions, if they are not properly motivated, are always bad for any economy. They may create advantages for producers that may not be the best, but “compliant”. In a long run it destroys consumer confidence and consumption patterns.
Note on the side, and please don’t take it as an attempt to advertise my product, I believe everyone should try wild pink and chum salmon from Sakhalin. Alrough the price of it tends to be higher than its farmed sister species, I believe the taste in consumer’s mouth is a good point for consideration.

Saying this I’m boarding a plane to Brussels. See you there!

Posted on 9:57 AM | with 0 comments
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